Nic Cicutti: Advisers woefully unprepared for next financial crisis

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Oct 12, 2018

Nic cicuttiWhat has the industry learned from the 2008 crash? Probably not much at all

Anyone watching or reading the news over the last couple of weeks will not have failed to spot the odd story or two about the 2008 financial crash. This being the tenth anniversary of the event, the media has been taking a look back.

The idea, presumably, is to commemorate that experience and ask whether lessons have been learnt from it. I hope readers of Money Marketing will not mind if I offer my own minor recollections on that period, culled largely from what I was writing at the time in this publication.

The first thing that occurs to me from reading back over the tens of thousands of words from that period, is a sense of detachment between what was happening in our daily lives and what was being played out on our TV screens and in the pages of newspapers.

During the day, we all went about our normal lives. In the evening, we would come home and watch BBC reports where Robert Peston tortured the English language on his way to telling us about the collapse first of Northern Rock, then Bear Stearns, before finally Lehman Brothers and then most of the UK banking system.

Sure, for those concerned with making life-and-death financial decisions involving tens, hundreds or even billions of pounds, these were seminal days.

But my own cache of columns and emails from that period shows a huge dislocation between the minutiae of my own and advisers’ quotidian activities and the vast, frightening events taking place in the background.

For example, in March 2008, I wrote about the contribution to financial services of former FSA executive Christine Farnish, who had joined Barclays Bank in some meaningless role in order to “continue to delight customers”.

The extent of customers’ “delight” became apparent when an undercover BBC reporter at a Barclays call centre in Sunderland revealed epic misselling of products to its account holders. Farnish was then wheeled out to tell us this was “not in any way representative of the way in which Barclays does business”. Er, sorry Christine, it was – as the subsequent Libor and other product misselling scandals at Barclays demonstrated in spades.

In April 2008, I was writing about a 28-page paper from Aifa called Restoring Trust in Financial Services: Build on that which works. The theme of this slim document, both size-wise and in terms of intellectual heft, was entirely self-congratulatory.

Page after page used graphs from a so-called financial services “Trust Index”, claiming that IFAs stood head and shoulders above the rest of the industry. In fact, the figures were infinitely more nuanced. Not that anyone noticed – or really cared.

In May 2008, I was writing about Aviva’s proposed £80m name change from Norwich Union, a re-branding exercise I felt was pointless then and still do today. I also wrote about some meaningless statistics from Aviva/Norwich Union, when it declared the number of registered IFAs would fall to 10,000 from 21,000 by 2013 in the wake of the RDR. The report argued that a failure to comply with the RDR’s demand for greater professional standards from IFAs would leave a vast swathe of 2.7 million middle-market “orphan clients” just itching to be serviced by Aviva salespeople. What happened to that prediction?

In June 2008, I chaired a session at a conference on the RDR . Speakers included incoming Personal Finance Society chief executive Fay Goddard. Goddard raised the issue of the Thoresen Review of financial advice for those at risk from the consequences of poor financial decision-making. She pointed out that it needed a properly funded high-quality generic advice service to underpin it. Instead, we got the Money Advice Service.

During September, when Lehman Brothers collapsed, I found myself engaged in a spat with former trade body activist Alan Lakey over a Court of Appeal ruling against a firm of advisers, Heather Moor  & Edgecombe.

The ruling upheld the Financial Ombudsman Service’s decision to order HME to pay one of its clients £100,000 compensation over the mis-transfer of an occupational pension into an S32 scheme.

The ruling was a detailed and devastating rebuttal of HME’s attempt to prove that the FOS’s decision had been wrong – not that it stopped Lakey from portraying it as a campaign of persecution against a plucky little firm of Wiltshire IFAs.

The point of all these stories is not to argue that the financial crisis was having no effect on IFAs’ thinking or decision-making at the time. Other columns I wrote clearly referenced what was happening and its impact on advisers. We know house prices collapsed by up to 20 per cent during this period. Jobs were lost and many lives changed forever.

But looking back, I am struck by how many of us were so caught up in our daily routines that we failed to truly appreciate the seismic nature of what was engulfing us. It probably means that, when it comes to absorbing lessons from what happened 10 years ago, we probably have not learnt anything much at all. God help us next time round.

Nic Cicutti can be contacted at

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